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Activity of Development and Sale of Land attracts GST: AAAR [Read Order]

AAAR - GST - Agricultural Land - Capital Gain - Taxscan

The Appellate Authority of Advance Ruling (AAAR) upheld the ruling of AAR and ruled that Goods and Service Tax (GST) is payable on the development of land into residential layout and sale.

The Applicant, Maarq Spaces Private Limited is a Private Limited Company, registered under the Goods and Services Act, 2017, engaged in the business of property development. The Applicant submitted that he has entered into a Joint Development Agreement with Landowners for development of land into residential layout along with specifications and amenities. The consideration was agreed on a revenue-sharing basis in the ratio of 75% for Landowner and Agreement Holder and 25% for Applicant. The cost of the development shall be borne by the Applicant. Pursuant to JDA, Applicant had entered into an agreement with customers for sale of developed plots for consideration.

The applicant approached the AAR seeking clarification on the issue whether the activity of development and sale of land attract tax under GST and if the answer to the question is yes, for the purpose of taxable value, whether the provision of rule 31 can be made applicable in ascertaining the value of land and supply of service.

The AAR ruled that Goods and Service Tax (GST) is payable on the development of land into residential layout and sale.

The AAR further noted that the applicant receives as their remuneration for the provision of the services of development of the land and their subsequent activities related to the sale of the plots is an amount equal to 25% of the open market value of each plot. Therefore the entire amount received by them is liable to be taxed.

The Appellate Authority of Advance Ruling (AAAR) consisting of members D.P. Nagendra Kumar and M.S. Srikar upheld the ruling of AAR and held that Goods and Service Tax (GST) is payable on development of land into residential layout and sale.

To Read the full text of the Order CLICK HERE
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